I had the honor to speak yesterday at the Council on Foundations annual conference in Philadelphia about the future of global poverty and what it means for philanthropy. I like to think in 3s, so here are my three 3s to frame the big questions:
$3 billion = the annual giving of the Bill and Melinda Gates Foundation, on par with the median official donor of the DAC (or roughly equal in size to the aid programs of Australia or Italy). This underscores the rise of private actors as players in the development landscape, bringing not only plenty of new resources but also different business models.
$30 billion = the U.S. Government's aid flows last year. While less than 1% of the total U.S. budget, it is the largest amount ever given by a single donor in one year, and provides a good reminder that some of the official donors remain huge players. The UK, France, Germany, Japan, the EU, and the World Bank all still provide $10 billion or more per year. But these aid budgets are also all under severe budget pressure and will almost certainly shrink. More important, the US aid program, for all its heft, should be getting much more value for money for both taxpayers and recipient countries. The inefficiencies of the current system are well known, but real reform has just barely begun.
$300 billion = India’s foreign reserve holdings. This enormous number highlights the rise of emerging powers and the shifting dynamics of global poverty. Not long ago nine out of ten of the world's poor lived in poor countries. Now three-quarters live in middle-income countries like India, which have plenty of cash and technical expertise of their own. (And get your head around this: since the U.S budget deficit is financed by India and other creditors, it's not a stretch to conclude that any US aid to India would in fact be financed by...India.)
So, what does this mean for the future of philanthropy and how to best leverage new philanthropic dollars? I draw two broad conclusions:
Don’t just do the same old thing. New philanthropy shouldn’t crowd in where established donors already have a comparative advantage. Instead of spending $100,000 building a few schools in Tanzania (which might be a perfectly reasonable intervention but adds to the already heavy burden of recipient countries balancing multiple donors), foundations might gain more real-life impact by using those same resources to ensure that the $698 million compact that American taxpayers are giving Tanzania through the MCC is well spent. Influencing the big players by improving their policies and holding their feet to the fire is a good way to leverage philanthropic dollars.
Instead lead through risk-taking and innovation. Venture philanthropy should complement existing donors precisely in the areas where traditional donors’ hands are usually tied: bringing new ideas and technologies to the table, and piloting innovative development programs. The old model of rich Westerners designing and implementing projects is going to give way to new models that are built around incentives, especially those that encourage the provision of global public goods, and experimentation. Rather than (again) building schools in Tanzania, philanthropists might make a bigger contribution by trying to understand the demand constraints to education and experimenting with (and rigorously evaluating) new models, like conditional cash transfers or pay-for-performance.